Giant Bitcoin ETF growth ‘will continue for years’, says Bitwise CIO

The strong demand for Bitcoin spot ETFs over the past couple of months is likely to continue for several years, Bitwise CIO Matt Hougan predicts.

The executive highlighted “key takeaways” from his interactions with investors and capital allocation entities interested in buying Bitwise's self-managed ETF this month.

One take on their Twitter account noted that there is “significant dispersion in the rate of acceptance of Bitcoin ETFs.” While some financial advisors and national account platforms are plugging the products as soon as possible, others aren't considering portfolio allocations for their clients at all — or won't enable them on their platforms until next year.

“The reality is, most professional investors still can't buy bitcoin ETFs,” Hougan wrote. “This will change through a series of 100+ individual due diligence processes over the next two years.”

Since its launch on January 11, Bitcoin ETFs have taken in net inflows of $11.7 billion, despite outflows of more than $14.3 billion of old BTC from the Grayscale Bitcoin Trust (GBTC). On Tuesday alone, they took in another $418 million, including $16.7 million for the Bitwise Bitcoin ETF.

Brazil-based Hashdex announced today that it is finally bringing its Bitcoin Spot ETF online.

Such flows in past years represent a much larger volume of money in institutional Bitcoin funds than today. According to CryptoQuant, this measure rose from less than $20 billion to more than $94.6 billion in the past six months, as enthusiasm around ETFs began to take hold.

According to the data on the chain, the number of “storage addresses” – Bitcoin addresses that only buy and never sell – also showed a significant increase.

Julio Moreno, head of research at CryptoQuant, told Decrypt that “by the beginning of 2024, we estimate that the monthly demand for Bitcoin has increased from 40K Bitcoin to 213K Bitcoin.” “

Compared to years past, Hugan said investors dialed in the once-good 1% of their Bitcoin portfolios and now prefer 3% and more. The executive believes that bitcoins are “at-risk ETFs” in the eyes of many.

“Before, people were worried that bitcoin could go to zero. In that world, 1% allocation is all you can stomach,” he said. “But when ‘going to zero' is off the table, 3% or 5% starts to make more sense.”

According to James Butterfill, head of research at Coinshares, most institutional investors remain “heavily invested” in Bitcoin, comprising just 0.2% of their portfolios on average.

Butterfill told Decrypt that “how much bitcoin ends up with depends on risk appetite.” A 4% position represents 100% more risk in a normally adjusted portfolio.

Edited by Ryan Ozawa.